Austria: COFAG Partly Unconstitutional – Continued Disbursing

Dec 1, 2023 Benn-Ibler Rechtsanwälte

The Austrian Constitutional Court (Verfassungsgerichtshof, hereinafter VfGH) has declared parts of the legal basis of the COVID-19 Financing Agency of the Federal Government GmbH (COFAG) to be unconstitutional. However, payments can continue for the time being because the VfGH has provided for a transitional period of one year.

Several provisions of the Federal ABBAG Act on the establishment of a federal cutback participation company and parts of the guidelines issued as an ordinance are affected.

The VfGH has ruled that the requirements for the outsourcing of COVID-19 subsidies to a limited liability company were only partially met. These requirements are essentially:

• Transfer of tasks must respect the principle of efficiency and objectivity
• Only ancillary tasks may be delegated, but not the core functions of the state.
• The management authority of a supreme body (in this case the Minister of Finance) must be guaranteed.

COFAG violates the principle of objectivity because it does not have the necessary equipment to perform its tasks on an equal footing with a State body. In addition, COFAG did not have significant tasks to perform independently, as the monitoring of eligibility requirements was essentially transferred to the tax offices.

In addition, the lack of a legal entitlement to financial support violates the principle of objectivity. This is because financial support is to be seen as compensation for disadvantages caused by measures taken under epidemics laws. In such a case, however, there has to be a legal entitlement. According to ABBAG, the Minister of Finance was the one who had the power to manage and control the programme.

The following aspects were also found to be unconstitutional or unlawful:

• In accordance with the COFAG guidelines, COFAG was not subject to instructions with regard to decisions within the framework of the guidelines. Under the ABBAG, this exception violated the Minister of Finance’s management and supervisory powers.
• The exclusion of companies from funding if they had been fined for a financial or association offence within the last five years prior to application is not objectively justified under the principle of equality. A constitutional rule should have been based on the date of the offence, not the date of the penalty or fine.

VfGH G-265/2022, V 139/2022, V 236/2022, V145/2022, G 172/2022 (5 October 2023)